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Buying a home can be an expensive and risky proposition. Once you’ve made an offer on a house and it’s accepted by the seller, you’re both bound to the contract. As the buyer, if you back out for a reason not allowed by the contract, you’ll lose your earnest money deposit, which could be thousands of Ghana Cedis.

That’s why an appraisal contingency is your ally: It will let you walk away from the deal with your deposit if the home doesn’t appraise for the amount you’ve agreed to pay.

 

What Is An Appraisal Contingency?

Contingencies are conditions that must be met before a real estate contract is legally binding, and each includes a specified time frame. An appraisal contingency is a clause that allows home buyers to back out of their contract if the appraisal value of the property is less than the agreed-upon purchase price.

 

Other Contingencies

Most purchase agreements include three contingencies:

• An appraisal contingency

• A finance contingency: This states that the deal depends on the approval of your loan.

• An inspection contingency: This requires that the home pass a home inspection.

 

 

When Do You Need An Appraisal Contingency?

If a lender is involved, you’ll need a home appraisal and should consider an appraisal contingency. “It’s an opt-out for the buyer who’s financing. If the home is not worth the price the buyer has agreed to pay, it can impact how much the lender is willing to lend and possibly the ability of the buyer to secure the loan.

Cash buyers have an option to add an appraisal contingency to their offer and engage an appraiser, “but it’s not a third-party requirement.

Cash offers are king because they do not require an appraisal and can close quickly.

 

Who Pays For The Appraisal?

The appraisal is an extremely important part of the home buying process, typically paid for by the buyer. The average cost that a buyer will pay for an appraisal is GHS2,000 – GHS9,000 and will be due either upfront or at closing. Paying for an appraisal is important because the value determined by the appraiser is the maximum amount that can be loaned out by a mortgage company.

The lender will retain a licensed registered appraiser to determine the fair market value of the home. The appraiser arrives at that value based on the home’s general condition, location and comparative sales (or comps) in the area.

 

How Long Does An Appraisal Contingency Take?

Your lender or real estate agent can provide guidance on the specific timing for your appraisal contingency, but generally you should allow 2 – 4 weeks for the appraiser to visit the home and complete their report. Different loans take different qualifications. And some seasons will be busier than others for the inspectors.

If the value comes in higher than the sales price, everyone is happy, except maybe the seller, who might feel they should have asked for more. But if the appraisal comes in lower, things can get complicated.


 

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MORTGAGES ARE SECURED AGAINST YOUR PROPERTY. YOUR HOME (OR COMMERCIAL PROPERTY) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBTS SECURED ON IT - REPAYMENT ASSISTANCE PROGRAMME AVAILABLE FOR QUALIFIED CUSTOMERS. ALL APPLICATIONS ARE SUBJECT TO STATUS AND OUR LENDING CRITERIA - THIS MEANS THAT THE AMOUNT WE WILL LEND YOU WILL DEPEND ON YOUR INDIVIDUAL CIRCUMSTANCES, THE TYPE OF PROPERTY AND THE AMOUNT YOU BORROW.

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